| The single member LLC is a great asset protection | | | | allow for a single member. The reason they are not |
| vehicle for the sole owner, but in order to ensure that | | | | always liked by judges and lawmakers is that when |
| you are really protected, you must adopt a single | | | | there is only one member, the business looks like the |
| member LLC operating agreement and make sure | | | | mere alter ego of the sole owner. It appears to have |
| you have one suitable for your business. | | | | the exact same features and is run like a sole |
| A sole owner operating as a sole proprietorship is | | | | proprietorship. |
| always risking everything he owned in order to run and | | | | Well, they may be right but it still does not matter |
| grow a business. This is because his business is | | | | because the limited liability company laws passed in |
| inextricably a part of him and so if a business problem | | | | every state provide for this protection if a sole owner |
| ever arose and caused some liability, the sole owner | | | | chooses to form a single member LLC for his or her |
| would be personally liable. What does this mean? | | | | business. So, no worries- the protection is there. |
| It means that everything he owns like his home and all | | | | However, in order to make sure you have a strong |
| his money is at risk. Before the limited liability company | | | | case if ever challenged, you should always have a |
| was available, this sole business owner could choose | | | | single member LLC operating agreement for your |
| to get a corporation for protection but many did not go | | | | business. This is a written document that sets forth the |
| that route because of the costs and added complexity | | | | governance rules and procedures for the legal entity. |
| of incorporating a business. | | | | By having one, you are showing the world that you |
| Then along came the limited liability company and even | | | | are recognizing your LLC as a separate person from |
| more importantly the single member LLC. Now, the | | | | yourself. After all, you are giving it its own personality |
| solo entrepreneur has a viable option for protection. He | | | | by adopting a proper written governance agreement. |
| can run his business and protect his personal assets | | | | This is very important because if your business is ever |
| from business liability. In addition, he will not be required | | | | sued, the first thing everyone will want to see if your |
| to meet all these formalities because these types of | | | | LLC paperwork and if there is none, they will claim that |
| legal entities are easy to manage. | | | | you disregarded your own legal entity which, in turn, |
| However, it should be noted that lawmakers are | | | | means, you should be personally liable. With a proper |
| sometimes suspect of the single member LLC. For a | | | | single member LLC operating agreement and some |
| time, they were not even allowed in some states. But, | | | | minimal paperwork, you can win this argument every |
| recently, every state has changed their LLC laws to | | | | time. |